Drugs in 2018 - Access, Pricing and Payment

This Mid-Year Forum 2018 hearing looked at the ways in which the government and other payers seek to lower the cost of drugs to patients and improve access and treatment outcomes. Following is a brief summary.

Abstract

This hearing looked at the ways in which the government and other payers seek to lower the cost of drugs to patients and improve access and treatment outcomes. Topics included proposed reform of Part B drug payments to physicians; new value-based drug pricing schemes and the FDA's regulation of compounded/repackaged biologics and other drug products. The session included the perspectives of government policy makers, industry and ophthalmology leadership on how these changes affect practices and patient care.

Background Information

Moderator Cindie Mattox, MD, set the stage by outlining the access problems that patients face due to problems with formularies/coverage, reimbursement, etc. The current administration has talked tough on controlling ever-increasing drug costs and discussed a variety of options. This session explored all aspects from Part D, C and B drug issues and where changes might occur.

Summary of Comments from Guest Speakers

Everyone wonders how far Trump will go. Will he incorporate such sweeping proposals as negotiating prices or competitive bidding? Changes to date include:

Lowering 340B payments, which has brought a lawsuit from hospitals;

Value-based pricing that would pay for outcomes underway for two drugs Luxterna and Kymria;

Eliminating the FDA backlog on generic approvals;

Changes in manufacturer fee programs.

Previous discussions have looked at passing the point-of-sale rebates and discounts currently given to pharmacy benefit managers on to consumers. Watch for additional rulemaking later this year that could include such proposals. Such approaches have trade-offs that could affect some patients’ premiums.

Health and Human Services priorities moving forward will likely be included in upcoming White House announcements. These could include:

Marazzo’s company has developed the first gene-based pharmacological treatment for any form of retina disease. Despite the fact that it is a rare disease that only affects a few thousand patients per year, the company did extensive research on the value of saving vision for a younger population who would otherwise face a life of lost wages/productivity, other health problems and life-long disability. They found a value of well over $1 million.

The company also went above and beyond to stand behind their product, reduce the costs from inception to delivery and smooth out the cost over time. Marazzo said they have agreed to refund money if the drug does not work. They also provide “buy and bill” options for direct payments to the insurers and take the facilities out of the equation. In addition, they cap patient co-payments at in-network rates, regardless of status, and cover patient costs for travel to treatment centers. To date, they have signed agreements with Harvard Pilgrim and in negotiations with CMS and other payers.

In a free market, increased price results in increased production, but we do not have a free market—other limitations include the Food and Drug Administration and other regulation.

The FDA says 70 percent of generic drug shortages stem from manufacturing breakdowns or quality issues. The problem is exacerbated by limited number of manufacturers available to respond. Other issues include small market/low profit margins and control of entry by manufacturers (pay for delay).

Rising drug prices have been headline news. Trump has called out pharma as “getting away with murder”, driving up costs. The Medicare Modernization Act of 2003 established a Part D drug benefit under Medicare, but banned government negotiation of drug prices. By 2016, 87 percent of Americans supported government price negotiation under Medicare.

Medicare Part B drugs are based on average sales price, or ASP, plus 6 percent, revised quarterly based on drug company reports of sale price minus discounts or rebates. Sequester cuts, however, cut this to ASP +4.3 percent. Medicare pays 80 percent of allowable.

Dr. Rehovsky provided an overview of the outsourcing industry and its changes since passage of the Drug Quality and Safety Act. Ophthalmology is one of the biggest users of compounded drugs, including anti-fungals, fortified antibiotics, dry eye formulations and anti-VEGF medications. His company provides 140,000 Avastin-filled syringes a month.

Building a DQSA compliant facility is very costly, requiring nearly $10 million in initial investment. Inconsistent requirements for 503A and 503B also add to costs and burdens.

State pharmacy boards regulate 503A and only have to be tested twice a year.

503B facilities are federally regulated and have to undergo continuous testing over a two-week time period.

Furthermore, compounders face a growing shortage of pharmacists and technicians, many of whom do not learn sterile processing as part of their training. Out of the 67,000 pharmacies in the United States, only 73 are registered for outsourcing. Furthermore, states are encroaching on federal authority and muddying the waters on requirements, adding to costs.

Summary of Audience Comments

Some expressed frustration regarding a wide range of issues and problems, including that rising prices seem directly linked to government regulations and or FDA coziness with the pharma industry.

Questions included the variability of best use-by dates and why physicians aren’t paid for value. Responses noted the cost of setting up testing labs and the lack of finalized requirements from the FDA.